West Coast Ports Recover from Slow 2015 Plagued by Labor Tensions

It’s fair to say that West Coast ports are tentatively relieved with the amount of business they’ve seen this year so far, despite the economic slowdown in China. Rebounding from a disruptive labor dispute that slowed traffic in early 2015, the Port of Los Angeles and Port of Oakland are reporting strong gains year-over-year in container volume for the first quarter of 2016.

Less growth than it seems

Do West Coast ports have reason to be optimistic? Yes, but not without reservations. Both the Port of Los Angeles and Port of Oakland are recording notable year-over-year gains, yes, but the numbers indicate a bounce back from a lackluster early 2015. We’re not seeing as much growth when taking a longer view.

In the Port of Los Angeles’ 109 year history, the current quarter has set the record for the busiest quarter yet. From January to March, the port handled 2 million twenty foot containers (TEUs), up 11.3% from the same period last year. In 2014, the Port of Los Angeles handled 1.92 million TEUs. That means growth from first quarter 2014 to now has been at a much more modest 6%.

Further north, the Port of Oakland handled 18.9% more volume than the first quarter of 2015 due to the resolution of labor disputes. No comparison was made to the same period in 2014.

Rising imports, driven by consumer goods and pharmaceuticals, have contributed to the growth of container volumes. In the first two months of 2016, the Port of Los Angeles experienced 36% year-over-year growth of import volumes while the Port of Oakland saw 52% more imports pass through its terminals than the previous year.

A weaker dollar has improved the competitiveness of American exports, driving export container volumes up as well. But while export volume has recovered from 2015, they are still down compared to two years ago at the two ports. At the Port of Los Angeles, March export volumes are down 13% compared to the same month in 2014. The Port of Oakland also saw a decrease of 9.8% from 2014.

What about labor?

We can’t be sure West Coast ports have overcome the labor tensions of the previous year that caused multiple delays and sent business to East Coast and Gulf Coast ports. The International Longshore and Warehouse Union (ILWU) and Pacific Maritime Association (PMA) signed a 5-year-contract last March, but it hasn’t been without birth pains. The labor dispute at the Port of Oakland towards the end of last month reveals that serious tensions and miscommunications can still erupt and cause temporary shutdowns. The ILWU represents 42,000 dock workers in 60 local unions along the West Coast, making it a powerful group with formidable organizing and bargaining power.

That being said, if labor disputes do stand in the way of efficient port operations in the future, importers and exporters must be nimble and flexible, willing to divert shipments to alternative ports on the West Coast, depending on where a strike may happen. Another option would be to use air freight instead of ocean freight.There are plenty of options for shippers that are open to alternative routes and they don’t necessarily have to divert as far as the East Coast.